NIKE and Vietnam: A Labor Case Study

Backgrounder

In the mid 1990s, NIKE was riding high, it’s signature “swoosh” the epitome of cool. Then, reports emerged that its subcontractors in Asia, particularly in Vietnam, were underpaying and mistreating workers. The outcry turned into a public relations disaster for NIKE, one from which it still has not fully recovered. Human rights groups, not reporters, were the first to uncover the abuse in Vietnam. Yet reporters and NIKE itself should have seen trouble coming. The case is a textbook example of how one country’s history and culture helped create a hostile environment for a company like NIKE.

When NIKE arrived in Vietnam in 1995, the country was just emerging from two decades of post-war isolation. Vietnam ranked as one of the world’s poorest and most overpopulated countries. But it had a semi-literate work force that was already earning praise from pioneering foreign investors for diligence. Freedom of association was illegal, meaning workers could not form their own unions or strike at will. And the authoritarian, communist government was eager to manufacture for export. NIKE and Vietnam looked like a perfect match. The company quickly became the largest foreign-invested employer in Vietnam with 10 subcontracted factories and 35,000 to 40,000 jobs.

What went wrong? NIKE made several missteps that helped turn later issues inside factories into full-blown international incidents. For starters, all of NIKE’s subcontractors in Vietnam were South Korean and Taiwanese. Yet, there are few people more hated by the Vietnamese than the Koreans (who fought with the U.S. in the Vietnam War and were guilty of numerous atrocities in southern Vietnam) and ethnic Chinese (who made up the majority of boat people driven out of Vietnam in the 1970s and 80s). The Korean and Taiwanese factory managers quickly gained reputations as harsh managers - an oil-and-water match with young, reticent Vietnamese women from the countryside.

Nor did NIKE understand the venerated status of blue collar “workers” in a communist country like Vietnam, where nearly every propaganda poster features a young male or female member of the proletariat. At the local level, the workers represent the backbone of the Communist Party. When NIKE’s subcontractors abused some workers - one was hit with a sneaker, others were made to stand in the noon day sun or run laps around the plant - Vietnamese viewed the abuses as an attack on the very heart of their nation.

NIKE expected that the lack of a free press - common in many developing countries - would keep the problems inside the factories out of the newspapers. But it badly underestimated the survival instinct of the Vietnamese government. The Party, under pressure from its population to loosen political and economic control and accelerate reforms, instead found foreign invested companies like NIKE a perfect distraction from its own internal issues. The government instructed Vietnam’s two most influential labor papers to investigate and attack NIKE. The editors, both government appointees, followed through with a vengeance. NIKE found itself featured almost daily in the newspapers, stirring further antipathy among the Vietnamese. One labor reporter admitted that his editor was telling him what to write and when to write it. Some of the coverage was, at best, exaggerated, at worst, false. At one point, workers en masse complained to a reporter about the lunch food and demanded the contract go to the government-controlled labor union - a deal worth tens of thousands of dollars. But many foreign reporters picked up the stories without noting the controls on the Vietnamese press.

NIKE finally got fed up. Its representatives told the Vietnamese government it wanted the attacks ended or it would take the jobs elsewhere. Almost overnight, the critical coverage stopped. Labor reporters said they had been ordered to write only positive stories about NIKE. They then turned their attention to the company manufacturing toys for McDonald’s. The problems inside NIKE factories continued for another year. But you did not read about them in the Vietnamese press.

In the case of NIKE and Vietnam, the country’s historical and political heritage clearly had a significant role in how the story played out.